Italy PM urges Germany to move on growth

Italy's Prime Minister Enrico Letta holds a news conference at the end of a European Union leaders summit in Brussels October 25, 2013.

Credit: Reuters/Yves Herman

VALLETTA (Reuters) - Italian Prime Minister Enrico Letta urged the next German government on Monday to push for more growth in Europe, saying it was in Berlin's own interest to ensure that economies across the continent pulled out of recession.

"The hope is that it brings economic policies which consider that recovery in Europe is a priority for Germany as well," Letta told a news conference with Maltese Prime Minister Joseph Muscat.

Italy and others in southern Europe are pushing Berlin for an easing of the strict austerity imposed on them in the euro zone's debt crisis, blaming it for their continuing struggle with recession and high unemployment.

The United States last month also aimed a broadside at Germany for running a huge trade surplus at a time when other countries need its rich consumers to be buying more of their goods to bolster growth.

Both Chancellor Angela Merkel's Christian Democrats and the centre-left Social Democrats reject those charges as they continue talks on forming a grand coalition of the country's two biggest parties.

German economists argue it has more than halved its trade surplus with the rest of the euro zone but its critics point to a gap that is higher than even the 6 percent threshold the European Commission considers excessive.

"If there is growth and stability only in Germany and the rest of Europe is left out, in the end it will be bad for Germany as well," Letta said. "Germany's internal stability makes sense as long as it helps growth and stability in Europe."

Letta said he would make the same point at Germany's Social Democrat party congress later this week and at a separate conference organized by the daily Sueddeutsche Zeitung.

Italy, the euro zone's third-largest economy, is still stuck in its longest recession since World War Two.

The government forecasts a 1.8 percent contraction this year before growth of 1.1 percent in 2014, though the 2014 projection is considered too upbeat by virtually all independent forecasters.

On Monday Giorgio Sangalli, the head of the main retail body Confindustria, said there was no reason for optimism.

"Our companies in the retail, tourism and service sectors have no strength left, from north to south, and unfortunately 2014 certainly won't be the year of a substantial recovery," he said at a conference in Rome.